Five Ways to Pay for Long-Term Care — and What Each One Costs You

Reviewed by Virginia Barausky, CLTC, RSSA® · August 10, 2026 · figures verified against ACL.gov / Medicare.gov

1. Self-funding: pay out of savings

The default plan, and for some households the right one. If your assets are large enough that several years of care would not change the surviving spouse's standard of living, insuring the risk may simply be an unnecessary expense.

What it does well: total flexibility. No underwriting, no premiums, no policy terms, no claims process. You choose any care, anywhere, and change your mind whenever you like.

What it costs you: sequence risk falls entirely on you, and care costs tend to arrive at the worst possible time — often alongside a market drawdown, and often for the higher-earning spouse first. The number that matters is not your net worth; it is what remains for the healthy spouse after the sick one has been cared for. Run that scenario with the cost estimator before deciding you can absorb it.

2. Traditional long-term care insurance

A policy that pays a defined benefit when you need help with two or more ADLs or have a cognitive impairment. You pay premiums; if you need care, it pays for care.

What it does well: it buys the most benefit per premium dollar of any option here. If the goal is maximum coverage for minimum outlay, this is the efficient answer.

What it costs you: it is use-it-or-lose-it — if you never need care, the premiums are gone, which is what people dislike most about it. Premiums are also not guaranteed level in most older policies; carriers can seek approval for class-wide rate increases, and many did. Modern policies are priced more conservatively than the ones that produced those headlines, but the structure still puts rate risk on the policyholder.

3. Hybrid life insurance with a long-term care rider

A life insurance policy that lets you accelerate the death benefit to pay for care. Use it for care and it pays for care; die without needing care and your beneficiaries get the death benefit.

What it does well: it removes the use-it-or-lose-it objection entirely, which is why it is now the most common structure sold. Premiums are typically guaranteed level. The money leaves your estate one way or the other.

What it costs you: less care benefit per premium dollar than a traditional policy, because you are also buying life insurance. And the two benefits usually share one pool — every dollar spent on care reduces what your beneficiaries receive.

4. Asset-based long-term care

A single premium — often repositioned from a CD, a savings account or a non-qualified annuity — that buys a multiple of itself in long-term care benefit, with a return-of-premium guarantee.

What it does well: it is the option for people who hate the idea of paying premiums for something they might never use. If you need care, the asset works much harder than it would have in the bank. If you don't, your heirs receive a death benefit. If you change your mind, most designs let you take your money back.

What it costs you: it requires a lump sum you can afford to reposition, and that capital is no longer doing whatever it was doing before. This is a reallocation decision as much as an insurance decision, which is why it usually belongs in a conversation with your financial advisor rather than instead of one.

5. Medicaid

The country's actual long-term care safety net, and the plan most people fall into rather than choose.

What it does well: it does not run out. For a household without the assets to self-fund or the health to insure, Medicaid is the answer, and there is no shame in it being the answer.

What it costs you: it is means-tested, so it pays only after assets are largely spent down, and it restricts you to providers that accept Medicaid — which in practice narrows both the setting and the timing of care. Florida applies its own income and asset tests plus a look-back period on transfers, so late-stage rearranging of assets generally does not work the way people hope. Current figures come from the state; see Medicaid.gov and Florida's Agency for Health Care Administration.

So which one is right for me?

Honestly: it depends on three things we would need to ask you about — the size and composition of your assets, your current health (which decides what you can even qualify for), and how much you care about leaving something behind.

What we can say without knowing any of that is which questions decide it. Would several years of care change your spouse's standard of living? Would you rather pay a smaller premium you might lose, or reposition a larger asset you keep? Is there a beneficiary whose inheritance you are protecting, or not? Those three answers narrow five options to one or two very quickly.

We hold the CLTC designation specifically for this conversation, and we work alongside financial advisors rather than around them — the funding decision touches the rest of the plan, and it should be made with whoever built that plan in the room. Start with a conversation.

Frequently asked questions

Is long-term care insurance worth it?

It depends on what would happen to your household if care were needed for several years. If that scenario would not change the healthy spouse's standard of living, insurance may be unnecessary. If it would, the question is not whether to fund the risk but which of the structures above fits your assets and health.

What is the difference between traditional and hybrid long-term care insurance?

Traditional pays only if you need care — more benefit per premium dollar, but use-it-or-lose-it and with rate-increase risk. Hybrid pairs care benefits with a life insurance death benefit, so the money pays out either way, at the cost of less care benefit per dollar and a shared benefit pool.

Can I use an existing annuity or CD to pay for long-term care coverage?

Often, yes. Asset-based long-term care is usually funded by repositioning a lump sum from exactly those places. Whether it makes sense depends on what that money was doing and on the tax treatment of the transfer, which is worth reviewing with your advisor and a tax professional.

What happens if I am declined for coverage?

Long-term care funding is medically underwritten, and declines happen. If you are not insurable, the plan becomes a self-funding and Medicaid-timing conversation instead — which is a real plan, and one worth having deliberately rather than by default.